After posting weekly gains last week the market is now (as of this writing) modestly lower on the week. A very volatile week that saw prices almost make another new all time historical high. The week has been driven mostly by the anticipation of that so called event that might impact supply but has yet to happen or become identifiable. Most of the main market drivers this week have been biased to the bearish side starting with the US dollar which is now literally breached a strong support level for the Euro (see the chart below) or in terms of the dollar has now breached resistance. The dollar is very close to a breakout level and if it does break resistance and emerge from the trading range it has been in since March (again versus the Euro—see below chart) it could easily strengthen another 3 to 5% over the next month or so which would be very bearish for oil (or at least that is what oil is supposed to do if the dollar strengthens!). The G-8 countries are meeting in Italy and the dollar is on the top of the list of discussion items. Many in the currency trading business are likely to approach dollar trading very cautiously today in the event of any bullish statements or actions coming out of the meeting. A major concern would be dollar intervention.
On the week we have seen declines in everything except refining margins (as measured by the crack spreads) which were able to muster solid gains so far. WTI led the market lower with refined products following the lead of crude oil. Refiners faired pretty well on the week showing strong gains in cracks spreads for both gasoline & distillate. Gasoline is a bit of a surprise since supplies of gasoline remain very ample and in fact are close to 7 million barrels above last year at this time. Of the energies gasoline was also the most volatile as measured by the percentage change in the weekly trading range. Finally as mentioned above the dollar put in a good week showing solid gains versus the Euro & Yean and for most other major currencies (not shown in this table).
| | | Trading For the Week | | | ||
| | | | | | | |
| | Current | Change | Change | % Change | Weekly | Range % of |
| | Price | From | for | For | Range | Fri Close |
| | 7:20 AM | Thurs | Week | Week | | |
| July WTI | $134.95 | ($1.79) | ($3.59) | -2.59% | $7.50 | 5.41% |
| July HO | $3.9050 | ($0.0377) | ($0.0690) | -1.74% | $0.2105 | 5.30% |
| Jul RBOB | $3.4730 | ($0.0530) | ($0.0750) | -2.11% | $0.2239 | 6.31% |
| July NG | $12.657 | ($0.141) | ($0.036) | -0.28% | $0.521 | 4.10% |
| Jul 08 Cracks | | | | | | |
| RBOB Crack | $10.916 | ($0.44) | $0.44 | 4.20% | $1.10 | 10.50% |
| HO Crack | $29.060 | $0.21 | $0.69 | 2.44% | $1.87 | 6.59% |
| 321 Crack | $16.904 | ($0.224) | $0.52 | 3.94% | $1.354 | 10.20% |
| | | | | | | |
| Euro/$ | 1.5319 | (0.0100) | ($0.0440) | -2.79% | $0.0340 | 2.16% |
| Yen/$ | 0.9234 | (0.0031) | ($0.0286) | -3.00% | $0.0350 | 3.68% |
What is on the short term horizon? The G-8 meeting which could impact the short term direction of the dollar or even be a catalyst to push the dollar solidly through the key resistance setting the stage for a solid strengthening of the dollar and likely weakening of oil prices. On the bullish side for oil the market is watching the evolving strike situation in Nigeria by Chevron workers in Nigeria. Talks are reportedly not going real well and this could likely limit any major move to the downside today. Next week we expect more of the same and do not expect any major fundamental news emerging into the market. As such we think next week will be mostly driven by the outcome of the dollar. Watch it closely and watch for any signals coming out of the G-8 meeting
| Current Expected Trading Range | | | ||
| | 6/13/08 | Change | Upper | Lower |
| | | From | Resistance | Support |
| | 7:20 AM | Yesterday | | |
| Jul WTI | $134.96 | ($1.78) | $140.00 | $99.20 |
| July HO | $3.9050 | ($0.0377) | $4.0000 | $2.7100 |
| July RBOB | $3.4730 | ($0.0530) | $3.5000 | $2.5200 |
| July NG | $12.657 | ($0.141) | $13.000 | $11.000 |
| | | | | |
| Euro/$ | 1.5319 | (0.0100) | 1.6000 | 1.5200 |
| Yen/$ | 0.9234 | (0.0031) | 1.0450 | 0.9000 |
Dominick A. Chirichella
Energy Management Institute
tel 646-202-1433
tel 845.368.3904
fax 801.383.7510
www.advancedenergycommerce.com
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